ESIC cannot sell/lease its medical colleges, says Delhi high court

Date : 12/10/2017

In a significant move, the Delhi high court on Thursday (October 12, 2017) declared as “legally impermissible” the Employees’ State Insurance Corporation’s (ESIC) move to sell or lease medical education institutions established by it to state governments.

This judgement was in response to a writ petition filed in the court pointing out that ESIC’s actions were in violation of the provisions of the ESI Act.

The ESI is a social security and health insurance scheme for workers and their dependents. Its funds are primarily derived from contributions made by employers and employees under the Act, and it is to use this fund to provide benefits to employees in case of sickness, maternity, and employment injuries, among other things.

The ESI Act was amended in 2010 to include in its ambit the right to “establish medical colleges, nursing colleges and training institutes for its para-medical staff and other employees with a view to improve the quality of services provided under the Employees’ State Insurance Scheme.” After this, the ESIC started establishing medical, dental and nursing colleges all over the country. The investments made in these medical colleges were to the tune of Rs 10,000 crores – all from contributions by the insured workers.

However, in December 2014, the ESIC decided that it would “exit the field of medical education entirely as it is not the core function of the ESIC and [its] objective is unlikely to be met”. Further, it decided to halt all further admissions in these institutions and to hand over all existing medical colleges and institutions to state governments willing for such transfer.

This decision was met with objections by members who raised concerns over the future of students and faculty at said institutions, and also from representatives of students. The ESIC then said that it would continue admissions to existing MBBS/BDS/PG courses, but that it would not undertake any more medical education projects. It also said that it would continue trying to transfer other medical college projects to the concerned state governments.

In 2016, the ESIC successfully filed court applications for the transfer of its medical colleges in Mandi, Coimbatore and Paripally, Kollam to the Himachal Pradesh, Tamil Nadu and Kerala governments respectively. The same year, ESIC also sought permission to execute MoUs with the governments of Rajasthan and Bihar to hand over proposed ESIC Medical College and Hospital Buildings at Alwar and Patna.

However, these actions were in excess of and in gross violation of the provisions of the Act, and the aforementioned writ petition (Balaraj Jadhav & Ors vs Union of India & Ors) challenged these MoUs. The ESIC, the writ petition contended, has no jurisdiction under any provision of the Act to transfer the medical colleges and institutions to the state governments or further to enter into public private partnerships for their running and maintenance.

In response, the Delhi high court observed that the ESIC could only establish medical, nursing colleges and training institutions “for the benefit of insured persons, and if extended, for their families.” The court noted the nature of these MoUs between ESIC and state governments and said, in its judgment, that the scheme of the ESI Act did not enable the ESIC to transfer any assets to any other person, including state governments.

“Given the legislative mandate, we therefore, hold that the action of the respondent no.2 in transferring the medical colleges and institutions to the State governments is without jurisdiction, contrary to law and is illegal,” its judgment said.

Commenting on the case, Colin Gonsalves, senior Supreme Court advocate and senior counsel for the petitioners said, “The [ESIC] hospitals run from the contributions made by workers’ wages which runs into tens of thousands of crores of rupees. It was supposed to set up hospitals exclusively for the working class. Unfortunately, the board of management of this corporation saw a huge corpus of money – excess money – lying in the accounts and decided to siphon it away by making hospitals and then selling or leasing them to state governments. Interestingly, these governments were permitted to bring in private parties to run and operate the hospitals.”

“The MoUs between the ESIC and the state governments show that private parties were to come in and replace the state governments [in running the hospitals] and that the private parties were allowed to charge whatever they decided from patients. So the hospitals were turned from free hospitals into public private partnership hospitals which would charge anything they wanted for treatment,” he added.

“This judgement will put an end to the ESIC’s huge fraud which was supposed to set up hospitals for working class people. We are very happy that this fraud has been unearthed by the high court,” Gonsalves said.

Follow us on

Human Rights Law Network (HRLN) is a division of the Socio-Legal Information Centre (SLIC). SLIC is a non-profit legal aid and educational organization, registered under the Registration of Societies Act, 1860, Indian Public Trust Act, 1950 and the Foreign Contributions (Regulation) Act, 1976.